Indian Real Estate Consolidates

By: George Gonigal

Indian real estate sector has grown by a staggering pace in the past five years however the markets have been undergoing the phase of correction at least for the last three quarters, gradually shedding off unrealistic price levels that had taken shape out of speculative market practices, and all-pervasive euphoria.

Nevertheless, real estate experts feel that correction would spell well for the industry in the long run, and will help industry to consolidate itself.

Emerging scenario

Given the current scenario, prices of commercial properties in India are reportedly stabilizing in metros.

Moreover, real estate developers in India have realized that they have to keep the prices at moderate levels in order to sustain in the markets. Meanwhile, business conglomerates are now scouting for alternative locations at the emerging cities like Jaipur, Chandigarh, Indore, Mysore and Vizag, as prices in bigger cities overheat.

Residential real estate, at the other end, has also been realigning itself with the market forces.

As per "Impact of Rising Home Loan Rates", a recent report by Assocham, there is a drop of almost 20 per cent in the residential real estate sales in India in the first two quarters of 2007.

Despite the recent cut in home loan interest rates, the range of 10-11 per cent a year is still quite higher than 7-8 per cent of the early years of 2000, and people no longer intend exposure to higher degrees of loan liabilities, said a senior official of a construction group, with request of anonymity.

In line with the trends, builders are now coming up with projects meant for masses, with annual incomes in the range between Rs one and two lakh, and the capital prices are kept moderate. As per estimates, more than 22 million homes will be required by this income group in the next couple of years.

Future Outlook

Although, a fall in demand has been reportedly noticed in the , it never means that the industry is slackening, S Ravi of Fairdeal Properties pointed out. Unprecedented flow of investments is there in the sector, and billions of dollars are seeking way towards India from across the world.

According to the experts, the matter is that the industry is maturing with the market conditions just like any other sector. And the developments hold well for each element--be it buyer, seller, tenant, financial institutions or developer.

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